FIN9797, Options Markets
Section UWA, Fall 2026.
Time: Wednesdays, 6:05-9:00m
Office Hours: Thursdays, 3:00-4:00 pm. Or by appointment. liuren.wu@baruch.cuny.edu.
Overview
The class provides students with a basic understanding of the derivatives market, with a focus on options. The class will highlight the fundamental differences between valuing and investing in derivatives versus valuing and investing in primary securities and will introduce the concepts of replication, hedging, relative valuation, and arbitrage trading.
Readings
The required textbook for this class is: John Hull, Options, Futures, and Other Derivatives, 11th edition.
Class format: Hybrid
The class will be delivered via a combination of pre-recorded videos and live tutorial Q/A sessions. The pre-recorded videos explain the concepts and go over the lecture notes. The tutorial sessions are to answer student questions and go over some sample questions and homework problems.
On dates marked as "tutorial", we will hold live tutorial sessions to answer student questions and go over some example exercises. I expect students to have read the lecture notes, watched the videos, and gone over the exercises posted on brightspace before the tutorial session of each chapter.
The midterm and final exams will be held online via brightspace.
Exams, grades, and class policies
There will be two exams: one midterm and one final. Exams are not cumulative, but the topics are built on each other.
Your grade will be based on a weighted average of the two exams and class participation, with a 65% weight on the higher score and a 25% weight on the lower score of the two exams. Class participation accounts for 10% of your total grade. The class participation score is based mainly on your homework assignments on the brightspace.
The exams will be given on brightspace remotely with live zoom session. You can ask me clarifying questions via zoom chat in private during the exam. Make sure you are at a place with a stable internet connection and you have practiced enough on the blackboard assignments so that you don't have accidents managing the blackboard session, such as signing yourself out or submitting the exam early by accident.
The exams are open-book. You are expected to do the exam by yourself, but feel free to consult textbooks, lecture notes, and online materials. You are strongly recommended to do numerical questions in excel. You can prepare excel templates in advance for certain types of computation-intensive questions. Avoid rounding during intermediate steps so that your final answers match the solution exactly.
You must notify me one week in advance if you are unable to attend an exam. Otherwise, you will receive a zero for that exam. When you cannot make the exam time for a valid reason, I will schedule a makeup date during the one week following the exam date.
Class schedule
September 2, Zoom introduction, Introduction (video)
September 9, Forwards and futures (slides, excel example). Chapters 1. Videos:
September 16, Zoom tutorial on forwards and futures
September 23, General properties on options (slides, excel example). Chapters 10,11. Videos:
September 30, Zoom tutorial on option general properties
October 7, Option strategies (slides). Chapter 12. Videos:
October 14, Zoom tutorial on option strategies and midterm review
Previous midterm exam samples: Fall 2007 midterm (solution), Spring 2008 midterm (solution), Fall 2008 midterm (solution), Spring 2009 midterm (solution), Spring 2015 midterm (Part I solution, Part II solution), Fall 2015 midterm (solution), Fall 2017 midterm A (B, solution), Fall 2018 midterm (solution)
October 21, Midterm exam, Brightspace (6:10-8:10 pm)
October 28, Option pricing with binomial trees (slides, excel example). Chapter 13. Videos:
November 4, Zoom tutorial on binomial tree
November 11, The Black-Merton-Scholes model (slides, excel example). Chapters 14,15 (17-18). Videos:
November 18, Zoom tutorial for BMS model
December 2, P&L attribution and risk management (slides). Chapter 19. Videos:
December 2 (also), Beyond BMS: 2nd/3rd generation option pricing models (slides). Videos:
December 9, Zoom tutorial on hedging/greeks and final review
Previous final exam samples: Fall 2007 final (solution), Spring 2008 (solution), Fall 2008 (solution), Spring 2009 final (solution), Spring 2015 final (solution), Fall 2017 final (solution), Fall 2018 final (solution)
Final exam, TBA, Brightspace